A bank is a producer of money substitutes. It borrows money, reserves a fraction for liquidity and invests the rest.
Its main function is to provide liquidity to the money substitutes (near-money) it creates through claims against its borrowings, by the managing of a reserve.
Liquidity refers to how easily (time and cost) assets can be converted into proper money.
Reserved (R) = borrowed (B) - invested (I).
Reserve Ratio = R / B. Debt Ratio = B / R (= money multiplier)
Capital Ratio = R / I. Savings Ratio = I / R
Currently, near money usually takes the form of checking accounts (demand deposit) and interest-bearing accounts (time deposit).
In addition, banks can create representative money through warehousing (safe deposit).
They also offer the service of money transfer.
Like any other producer, a bank converts time and capital to interest.
Investing: the allocation of savings into capital goods looking for a return.
Speculation: a form of investing in which the expected profits come from selling back the asset after price changed. To own in expectation of price increase, also to borrow in expectation of price decrease.
Interest: the return that a producer obtains (because of its investments or its products and services) less the cost of production. The cost of production is the depreciation of its reserve.
Creation reflects production. Destruction (property depreciation) reflects consumption.